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A ticket between the CBD and Melbourne Airport on the privately owned SkyBus currently costs $19.00 one way. If the airport were part of the city’s myki system it would cost just $4.10. At the city end, that $4.10 would give free transfer to other modes for a total period of two hours.

Following on from my recent listing of the key issues around airport rail, I’m taking a closer look at whether fares for a new Melbourne Airport rail line should be subsidised so that (say) they align with the myki tariff (see What are the key issues for Melbourne Airport rail?).

The maximum fare that could be levied will depend on a range of factors, including travel time, market segment, level of service, interchange, destination, price of alternative modes, and more. This should all be assessed in light of estimated construction and operating costs prior to the decision to build. But even if it’s privately owned, there’s still the option – if there are commensurate benefits – of subsidising fares.

On the evidence I’ve seen to date, I lean to the non-subsidy side (see here and here); here are some matters to consider:

The lowest cost rail option is likely to require $3 Billion to construct. Rather than subsidise airport travellers, at least some of that expenditure and all operating costs could be recouped through fares and applied to other public priorities, e.g. improving outer suburban public transport.

Charging airport travellers a premium fare is common for airport connections in Australia and worldwide. For example, the one-way fares on the privately owned rail lines in Brisbane and Sydney are around $17.00 to $18.00.

A premium fare more closely reflects the real costs of providing the service.

Business travellers aren’t price sensitive and can afford to pay the real cost; they’re more sensitive to travel and waiting time.

Tourists aren’t especially price sensitive either and are used to paying premium fares for airport connections. Victorian taxpayers don’t subsidise their flight, so there’s no evident reason why they should subsidise their ground travel.

Most Melbourne residents only travel occasionally by air and see the fare premium as a small component of a larger expenditure. They’re willing to pay; it’s not regarded as the impost it would be if it applied (say) to daily commutes.

There’s a strong case for aligning fares for airport workers with the myki tariff, but that doesn’t require subsidising all fares. Note though that public transport’s share of workers is still likely to remain very low (more than 95% of airport workers currently commute by car).

Equity isn’t the issue here it is with metro travel because flying is a luxury good. The impact on very low income travellers should be addressed directly via targeted income support and aimed at the total trip cost, most of which is the air ticket.

If the train were privately owned and operated as is the case in Sydney and Brisbane, some of the benefit of subsidised fares might (inevitably?) accrue to the owner rather than travellers.

A lower fare would make the train more attractive relative to driving, but it wouldn’t ameliorate congestion on the motorway system. Latent demand for a range of trip purposes (not just airport travel) would quickly fill road space made available by motorists who shift to rail.

The impact of fares on mode share is relatively modest. This analysis of a train service to Western Sydney airport estimates Opal aligned fares would capture 22% – 24% of CBD and Parramatta travellers, whereas a fare similar to Sydney Airport’s would capture 18% – 20%. Access to lower Uber fares has a bigger impact.

The primary reason most Melbourne residents don’t use SkyBus and won’t use the train to get to the airport isn’t because of the fare; it’s because they live in dispersed locations that make private cars/taxis the most attractive choice. Achieving a very high mode share for rail (in Brisbane it’s <10%; in Sydney <20%) would require policies that limit the utility of driving for travellers and ‘meeters & greeters’ e.g. airport entry toll, pricing motorways, higher parking charges, higher taxi/Uber fares.

The question of whether fares should be subsidised could equally be asked of the current SkyBus operation. It costs taxpayers nothing, so providing a multi-Billion subsidy for airport train users – many of whom are visitors or on business – is a big ask when that money could be used for other socially important purposes that directly benefit Victorian taxpayers. The external benefits of a large subsidy don’t appear that compelling.

I’m open to contrary arguments, but my view is build the line when demand justifies it and price it to recover operating costs and as much of the capital costs as possible. The way to tackle traffic congestion around the airport and reduce kilometres of car travel is to manage demand e.g. price road space.

Update 6/10/17: another justification for setting fares at a commercial rate is business travellers – who are likely to account for the largest part of the benefits in the BCA – are prepared to pay taxi fares and in most cases already do. A large proportion of those business travellers are visitors to Victoria.

See other recent articles on the subject of airport mass transit links:

16 thoughts on “Is subsidising airport rail fares the way to go?”

2 things here…. It’s not the “trains” rather it’s the “stations” that are privately owned in Sydney and Brisbane airport lines. And they both also offer airport staff standard network fares to airport stations, you just need to show your employee security ID

Brisbane at least has a lower fare option for airport workers:https://airtrain.com.au/ways-to-travel – near the bottom of the page.
$37/week – just buy a paper ticket [but only at the airport] once a week.
Back in 2012 it included the airport precinct out as far as DFO.

Fair points Alan: PTUA doesn’t oppose the idea of a premium fare as long as it can be integrated with Myki ticketing and is set at an efficient level (so as not to undermine the patronage objective).

Keep in mind that the status quo is not subsidy-free: it involves a substantial economic rent component in carpark charges, plus large effective subsidy by way of Tullamarine freeway capacity increases and Citylink tax concessions.

You could charge triple if the train passenger has a foreign passport. If I visit the Taj Mahal, I have to pay 25x as much as a local!

If the train passenger has an Aussie passport, charge them less. You could do the same for Myki cards. I had to show my Aussie passport or birth certificate to enrol in uni! They would accept nothing else!

“Charging airport travellers a premium fare is common for airport connections in Australia and worldwide.”

This is the weakest argument of those above. I recently caught a train to Manchester Airport, which is connected by regular trains originating from points across England. As these pass through the city centre as well, there’s no question of subsidising an airport line – it’s effectively just another suburban station. There are many other airports in Europe served by regular trains at regular fares.

I can’t see why we couldn’t do something similar with Melbourne Airport – make it a stop on a suburban line serving new suburbs, for example, or on a country line so it’d be useful for rural travellers too. Yes the line would have to still be built, but as a useful through-line it’d have utility beyond airport travel.

Agree with you that the airport train should be extended beyond the airport and the railway should have stations between the airport and Southern Cross Stations.

Consider how the new Haileybury College campus in the CBD has no oval! Of course they built a campus there because more and more people are living in Docklands and Port Melbourne. But what kind of kids are we raising if even very expensive schools have no oval?

We should build a proper school and uni in Tullamarine next to the airport railway and improve the quality of life. The footpath outside my house does not make profits – so stop building footpaths?

Although Tullamarine to Southern Cross is not a great distance, certainly not in the same category as Sydney’s Western Sydney Airport to Sydney CBD, which will be 50 kms as a relatively straight or slowly curved rail line, or say 55 kms by road. Nevertheless there might be demand for express services straight to Sthn Cross, so if an alignment is devised that suits other purposes then care needs to be taken to still provide an express service, for which the ideal solution might be passing loops.

My understanding is that to avoid Transurban litigation the line would need to be part of the “metropolitan rail network”. Hence it would be possible to have both an all-stops service and an express service. For an express service a fare premium could possibly be charged (I haven’t looked into the detail of this, as price elasticity of demand is a vexed issue) whilst the all-stops service fits the otherwise Myki fare structure. However, that CityLink Contract Material Adverse Impacts requirement might mean the airport line can’t solely be part of a High Speed Rail line heading north, like the CLARA idea, although that would certainly be helpful for many residents of northern Victoria and southern NSW if they (or anyone else) ever get their scheme accepted.

Thanks Alan
I didn’t have the benefit of that more up to date analysis.

On the question of all-stops and express links, I found the following in a PTV report, which makes me think that if the Feds really thought seriously about high-speed rail then Melbourne could get both an all-stops Myki fare service (not necessarily on the Albion East corridor) and a premium express service linked to high-speed rail going north towards (say) Seymour, so what would you think of that, in the context of their call last week for “faster rail” proposals (which maybe you could write on anyway):
QUOTE:
Given the Victorian Government’s
commitment to preserving and
protecting transport corridors to the
State’s airports, the Study has also
considered longer-term needs and
opportunities to provide a rail connection
to Melbourne Airport.
Over time, it is expected that the
Albion East route will reach capacity
given its interactions with services on
other corridors.

These interactions also mean there will
be limited opportunities for express
airport services on the Albion East route,
unlike the direct route options which
would allow shorter, express journeys.

While the Study has found the benefits
of the direct link option are currently
outweighed by the high costs, at some
point an express journey between the
CBD and Melbourne Airport will become
more important.
The direct link option shortlisted in the
Study aligns closely with one of the
route options being considered in the
Commonwealth High Speed Rail Study,
a link via Jacana and a tunnel into central
Melbourne.

This similarity in route options presents
the opportunity to create a new shared
rail corridor which could cater for both
High Speed Rail services and an express
Melbourne Airport Rail Link.
Public Transport Victoria advocates
Commonwealth support for ongoing
joint planning of this High Speed Rail
route linking the other east coast states
with the CBD via Melbourne Airport.
END QUOTE

I would imagine such a service north of Tullamarine under renewed policies for settlement into regions, could eventually get more patronage even than Tullamarine to Southern Cross, but under such a scenario it leaves me with a question as to whether travellers from the Airport to the city would be swamped by commuters coming in from the north? [I think we’d need a John Bradfield type foresight to properly judge such issues]

As I said in a comment in the previous day’s article on airport rail, the authors of the AECOM HSR study didn’t think an alignment via Melbourne Airport was warranted – they favoured an undergound route to the east in the vicinity of the Upfield line. They also favoured a peripheral station at Campbellfield.

The report goes on to say that an HSR alignment closer to the airport (but not necessarily going into it) might be justified if the savings from sharing it with a future Melbourne Airport train proved large enough, but the rationale was construction savings, not any inherent advantage in HSR serving Melbourne Airport.